EU pulling away from recession, data shows

JACK BARNETT

THE EUROPEAN economy is outperforming expectations and pulling away from recession as inflation continues to descend, official data has shown.

Growth across the 20 countries that use the euro hit 0.3 per cent in the three months to June, according to the bloc’s statistics agency Eurostat.

That topped analysts’ expectations of a 0.2 per cent expansion rate and returned the continent to growth after gross domestic product (GDP) flatlined in the first three months of the year.

Inflation is also dropping across the common currency bloc, down to 5.3 per cent, according to initial estimates by Eurostat, in line with forecasts.

July’s inflation drop will have been noted by members of the European Central Bank’s (ECB) governing council, who last week said another interest rate rise at their next meeting in September would depend on incoming data showing price pressures cooling.

However there are signs in Eurostat’s numbers that price pressures are withstanding the monetary authority’s tightening efforts. Core inflation held steady at 5.5 per cent.

The ECB last week backed its ninth straight rate rise, lifting its deposit rate to 3.75 per cent, the joint highest level since the monetary authority was created at the turn of the millennium.

Eurozone growth was powered by bloc powerhouse France expanding 0.5 per cent in the second quarter of this year. Spain lifted 0.4 per cent, while Ireland, often volatile, surged 3.3 per cent.

All the eurozone’s major economies notched a decline in inflation.

However some analysts noted removing France and Ireland from the calculations paints a bleaker picture.

“If we exclude these effects, the increase in eurozone GDP in [Q2] almost disappears,” Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics, said.